The LPC has recommended that the government raise the adult rate for the national minimum wage – which applies to workers aged 21 and over- to £6.70 in October 2015.
It also recommended increase of 3.3 per cent to £5.30 in the rate for 18-20 year olds, an increase of 2.2 per cent to £3.87 in the 16-17 year old rate, and an increase of 2.6 per cent to £2.80 in the apprentice rate.
The Association of Licensed Multiple Retailers (ALMR) welcomed the ‘measured increase’, arguing that a bigger jump in minimum wage would put too much pressure on hospitality firms.
ALMR Chief Executive Kate Nicholls said: “The Low Pay Commission has recognised the very real pressures being placed on businesses in terms of labour costs and tightening margins and the increases reflect this.
“We are also pleased to see the Commission recognising the importance of keeping youth and apprenticeship rates affordable for businesses. As a result, we are urging all parties to accept the recommendation.”
Economic recovery
The 3 per cent hike does represent the largest real-term increase in minimum wage since 2007, and the LPC said it would increase the minimum wage to its highest value relative to other wages.
LPC chair David Norgrove said the commission was concerned any ‘sharp increases’ in minimum wage would put jobs at risk, particularly given the pressure on small firms.
However, he added the commission was confident that economic recovery should allow for a further increase in the real and relative value of the minimum wage.
“An increase of 3 per cent to £6.70 is a larger real terms increase than last year and, on the basis of the most recent Bank of England inflation forecast, should restore three-quarters of the fall in the real value of the NMW relative to its peak in 2007,” he said.
“We judge that the improved economic and labour market conditions mean once again that employers will be able to respond in a way that supports employment.”
The LPC based its recommendation on a forecast which foresees lower energy costs, strong economic performance and ‘significant’ recovering in earnings across the economy, said Norgrove.
“If these expectations are not borne out over the year we will take this into account when considering next year’s recommendation,” he added.
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